In the next couple of weeks, North Carolina's top policymakers – from Gov. Bev Perdue to 170 members of the General Assembly – have a chance to make history. They have the opportunity to bring about fundamental tax reform – or to prolong the mishmash of outdated levies, excessive loopholes and inadequate taxes that have their origins in the Great Depression.

We urge legislators to look forward – not to the next election, but to the state's future – and to adopt a system that is simpler, that broadens its base and that reduces tax rates. It's a reform long overdue.

What's not clear is whether this General Assembly will summon the will to restructure the revenue system. With the state's unemployment level at 11 percent, many leaders are wary of bold strokes. Too many are willing to stick with a system that doesn't work well rather than risk the wrath of an electorate they believe – wrongly, we think – prefers the current system of higher tax rates over a broader base with lower tax rates.

That's why it's time for state officials to step up and back the visionary work by Senate Finance Committee Co-chairs Dan Clodfelter, D-Mecklenburg, David Hoyle, D-Gaston and Clark Jenkins, D-Edgecombe. So far, they have carried the arguments for a new system while other state leaders have ducked.

Perdue has campaigned for more revenue to help bridge a $4 billion-plus gap in the upcoming budget. But her rallies appear to be more about shoring up her support among teachers and state employees than about energizing the public to support a new tax system. Her appearances have been long on rhetoric and short on specific examples of why we need a simpler, fairer system that promotes sufficiency and minimizes periodic volatility in revenue.

We don't believe the system that Senate leaders have come up with is perfect. But its focus on a much broader sales tax base and reduced sales and income tax rates is the basis for real tax reform geared to North Carolina's future. Just about every state commission that has examined the tax structure over the past few decades has come to similar conclusions.

But Senate leaders made a big mistake in sending the House a budget with a $500 million hole in it. The Senate also is complicating the process by insisting that the state's taxpayers subsidize tuition for certain out-of-state university students, including those on some academic and some athletic scholarships.

The House, meanwhile, has seen some value in broadening the sales tax base and capturing some corporate tax revenue the state now fails to collect. But by increasing the sales tax rate slightly and creating new top income tax brackets, the House would take bad features of the existing tax system and make them worse. This is not the formula for revising a revenue system basically written three-fourths of a century ago. It's a formula for continuing problems.

Clodfelter – a former Charlotte City Council member whose understanding of state and local government funding mechanisms is extensive – has raised a simple question about tax reform in North Carolina. If not now, when? Our current system doesn't work. Annual tinkering in recent years hasn't fixed it. And with an economy in the midst of fundamental change, North Carolina must remake its revenue system to meet the public's needs.

Subscribe to The Charlotte Observer & Earn Miles.

Disclaimer